Monday, August 6, 2012

Different Kinds of Title Insurance?

What are the different kinds of title insurance in Maryland?

There are two basic kinds of title insurance that can be obtained for a real estate transaction:

Maryland Title Insurance Comparison

Lenders Policy - When you obtain a loan on a property the mortgage lender will require a Lenders Policy for the transaction.  The lenders policy provides protection for the lender in the event a title claim is made against the insured property.  This protects the lender's interest and investment in the property.  If a covered claim is made against the property the lenders title insurance will cover the investment of the lender and not the borrower or owner beyond the amount of the original mortgage or loan.  Typically these policies are issued for the amount of the loan or mortgage and not the value of the property.  Often times the value exceeds the mortgage amount leaving a gap in coverage for the owners interests.  Because of this a second type of title insurance is offered to owners.  See Below:

Owner Policy - The owners policy is an optional title insurance policy issued on behalf of the owner of a property.  The purpose of the owner's policy is to protect the owner for any monies at risk put toward the property.  In the event of an insured claim the owner is protected for any covered risk transferred to the insurance company for the insured property.  Often times an enhanced owners policy is available for purchase that provides coverage for more risks not covered in a basic owners policy.  Consult your title insurance agent for a price quote and comparison for both prior to making a decision on which policy best serves your needs and budget if you choose to obtain the optional owners coverage.

A list of common coverage risk categories for a basic policy are listed below:

A third party claims interest in title
Improperly executed document
Pre-policy forgery, fraud or duress
Defective recording of documents
Undisclosed restrictive covenants

A lien on your title because:
a. a security deed
b. judgment, tax, special assessment or
c. a charge by a home owner's association
Unmarketable title

Examples of covered risks in a typical enhanced owners policy may include the following:

Mechanics' liens

Forced removal of structure because:
a. it encroaches onto another property or an
b. it violates an existing zoning law*
c. of violations of a restriction in Schedule B

Land cannot be used for a Single Family Dwelling
(SFD) because use violates a restriction in
Schedule B
or a zoning ordinance.
Unrecorded easements
Pays rent for substitute land or facilities
Rights under unrecorded leases
Plain language

Compliance with Subdivision Map Act, if any*
Restrictive covenant violations
Discriminatory covenants
Covenant violation resulting in reversion
Violations of building setbacks
Enhanced marketability
Access - Enhanced vehicular and pedestrian
Map, if any, not consistent with legal description
Post-policy forgery
Post-policy encroachment
Post-policy damage from minerals or water
Post-policy living Trust Coverage for Trustee
Post-policy living Trust Coverage for Beneficiary
Post-policy automatic increase in value up to
Post-policy adverse possession
Post-policy cloud on title
Post-policy prescriptive easement
Boundary walls and fence encroachment*
Insurance coverage forever

* Subject to a deductible and maximum indemnity liability, which may be less than the
policy amount. Note: You may change your type of coverage anytime prior to closing.

As you can see there is a long list of available risks that you may get coverage for with an enhanced or expanded owners policy.  It is recommended to everyone you compare costs, coverage, and policy types before making a decision to buy an Owners title insurance policy in Maryland.  Often times the additional coverage can be purchased for a small additional premium relative to the entire transaction costs and may be a worthwhile purchase for protection in a property you are buying.  An example of an instant online rating calculator for a Maryland Lenders and Owners policy can be found on Excalibur Title and Escrow's website.
This is an anonymous quoting engine and does not require you to provide contact information or email registration to obtain.  Many title companies offer quoting engines like this on their website but if not when you can call them to discuss the pricing and coverage options.  Of course the idea is to get you to call so they can sell you their services while on the phone but keep in mind in Maryland you have the right to choose a title company.  Compare and choose wisely.

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